Does this mean you get paid more at the beginning of the year than the end?
It does not, we have various brackets that you fall into as your income rises.
- No income tax is paid on the first £12,500 of your earnings - 20% on everything between £12,500 and £50,000 - 40% on anything between £50,000 and £150,000 - 45% on anything over £150,000
The way that HMRC likes to figure it out is that you take the salary of the person in question, and then you take into account all of the above bracketing plus more little gotchas. And spread their tax over the course of the whole year as evenly as possible.
This gets more complex when you change jobs or get a new salary midway through the tax year and then payroll software has to account for that and try and even out all the payments for the rest of the year.
Hopefully that makes some sense!
2. We do indeed have liability insurance! We usually have the accountants of our customers raise any weirdness to us before payruns / run things in parallel for a month or two before going live. That's thankfully become much less common as we've done more reps.
In our second month of payruns we made an error where we didn't factor in the 4k employer allowance in the UK for one of our customers, which resulted in their PAYE bill being off.
The only way to react to those moments in my experience is to admit it and own it. Doing everything in your power to communicate exactly what went wrong, rectify the issue (usually via a correction to HMRC made over their API), and put tests in place to ensure it can't happen again. Integration tests can really help here, defining the exact scenario that led to the weirdness and asserting that the correct response comes out from now onwards.
Thankfully it's been a while since something like that's happened. We've had offers from a few payroll pro's to stress test the product which we'll definitely be taking them up on.
The trickiest scenarios that often catch people out are when employees move from part-time to full-time or paid weekly to paid monthly. So far we only support monthly payroll, but we'll definitely move into weekly at some point. Time is hard!
I dearly wish that every month was 28 days long.
Another tricky thing is communicating to customers things like how income tax is calculated. It's not done per month, but based on the amount you've paid so far this year. The method is different for directors, for whom you get to choose between two methods of calculation: https://www.gov.uk/employee-directors